2023 has been a tough year for the Fintech industry. Inflation, a cost of living crisis and a looming recession have weighed heavy on both consumers and businesses, while constantly changing financial regulations have threatened to stifle every last bit of innovation the industry has.

2024 will be no different. While the same challenges remain, new threats and opportunities are starting to emerge that require action, not just attention.

With that in mind, here are my predictions as to what consumers and businesses should consider in the new year and why payments in 2024 will be more evolution than revolution.

Digital wallets will overtake physical wallets

An increasingly cashless society has given rise to mobile commerce. So much so that digital wallets are set to become the most preferred online payment method during 2024, accounting for over a third of all payments globally. 

The continued trend towards mobile wallets is heavily driven by convenience. From tube fares to supermarket tills, digital wallets have become so popular that one in five people in the UK now says they likely won’t carry a physical wallet within the next five years. Because why take a bunch of physical cards with you when just your phone will do? 

However, the accessibility of digital wallets is a big issue preventing its widespread adoption.  While younger generations are typically the ones who drive new trends, it’s the older generations that ultimately have the cash. Many are still reluctant to move completely to digital wallets or simply can’t due to technology restrictions or lack of knowledge.

The UK will never likely become a fully cashless society, as there are still millions of people who rely on cash and other forms of traditional payments. However, over the next 12 months, businesses that haven’t gotten up to speed yet on offering mobile payment options risk being left behind.

We can already see the popularity of mobile wallets in the e-commerce landscape. There’s a reason why so many online stores want to offer Apple or Google Pay – because it boosts conversion rates. Consumers have become so accustomed to mobile wallets that we can’t even bear the thought of manually entering our card details every time we want to make a purchase. 

Plus, we’ve only reached the beginning of the digital wallet trend, especially in the UK. Whereas other EU countries are able to offer digital driving licences and even passports, we’re currently limited to loyalty cards, event tickets, or boarding passes. Expect this to change in the near future, especially if plans for the Digital Pound go ahead.

Payments will start to sing in harmony

With up to six different services being used to process just one transaction – from payment processors to fraud protection providers – businesses are increasingly looking for ways to simplify and optimise the payment process.

Like a symphony of different instruments coming together, the term ‘payment orchestration’ simply means bringing all of these different payment services and technology providers together to reduce the complexity and time spent on transactions as well as give businesses better insight into spending trends.

With payment orchestration, it also means that a merchant can have an agreement with more than just one or two acquirers for card payments and can choose to route payments through the acquirer that has the best rates for each type of transaction. For example, when they receive a decline with one acquirer, such as for risk-based reasons, they can simply route the authorization request to the next possible acquirer to get it approved.

Having a multitude of options is the go-to trend now. By offering several different transaction routes under one roof, payment orchestration can help reduce the chances of legitimate transactions being declined by a bank or payment processor and therefore increase sales and customer satisfaction.

Plus, with post-Brexit interchange fees at some of their highest rates for UK businesses, it can be a huge win for UK merchants that are servicing EU customers. Indeed, acquirers that offer additional separate merchant accounts within the EU stand to save the most, benefitting from lower exchange rates and fees for EU-based transactions.

Payment orchestration makes more sense for bigger corporations right now as businesses have a minimum volume of sales before it makes it a viable option, but once adopted it can make a big difference in terms of driving up sales and negotiating better transaction fees.

APP users will return to card payments

The tech revolution in the payments industry is extraordinary. but the rise of new methods may be opening the door for fraudsters to attempt new ways to trick people out of their hard-earned money.

For example, one of the highest growing areas of fraud is authorised push payments (APP), with more than 116,000 people in the UK falling victim to APP fraud within the first six months of 2023.

APP fraud involves fraudsters tricking victims into willingly but unknowingly making large bank transfers to them rather than a legitimate organisation, such as posing as someone from your bank or another trusted organisation. Ironically, the fraudster will claim you have been a victim of fraud and say you need to move your money to a different bank account.

Banks and financial institutions are struggling to prevent this particular issue. Over £152 million was returned in total by the banking sector to victims in the first half of this year, with the FCA recently finding significant flaws in banks’ and payment providers’ fraud risk management framework. 

Card payments, on the other hand, remain one of the most secure ways to make purchases. While methods like APP are still fairly new for banks and financial institutions and therefore come with unknown challenges, the security barriers for card payments have been built over decades. Not only are credit cards encrypted, but unlike APP fraud, suppliers are much more likely to return money as long as the customer can prove it was taken without proper authorisation.

In these two cases, of course it doesn’t make any sense to use APP over traditional card payments, but the bigger problem is that consumers aren’t educated on the risks.

In 2024, there needs to be widespread warning signs to help highlight the potential threat and ensure customers don’t take on any unnecessary risk. Consumers should be pushed to make card payments to keep their money safe until APP becomes mature enough that it can be used widely without the fear of fraud.